No-Brainer Portfolio: the Risk X-Ray
Bernstein's four equal quarters were his demonstration that a defensible allocation needs neither precision nor genius, hence the name. Three of the quarters are equity in different costumes, which makes this page a useful lesson in the difference between capital diversification and risk diversification: the analysis below shows how four equal weights become a very unequal risk budget.
William Bernstein, The Intelligent Asset Allocator (2000)
Analysis as of Friday 2026-08-28 · recomputed weekly from daily market data · methodology
What the No-Brainer Portfolio holds
The published allocation: Equal quarters of S&P 500, US small caps, international stocks, and short-term bonds.
Where the risk actually sits
Measured through the covariance matrix, IWM dominates the risk budget at 40.6% of total risk for 25.0% of capital; at the other end, SHY accounts for only 0.6%.
| Fund | Share of risk | Risk | Capital | Beta | Role |
|---|---|---|---|---|---|
| IWM | 40.6% | 25.0% | 1.06 | risk driver | |
| VEA | 29.8% | 25.0% | 0.79 | correlated core | |
| SPY | 29.0% | 25.0% | 1.0 | correlated core | |
| SHY | 0.6% | 25.0% | 0.0 | shock absorber |
How the pieces move together
SPY + IWM + VEA move as one block (average correlation 0.75): together they are 75.0% of the capital and 99.4% of the risk.
| Holding | SPY | IWM | VEA | SHY |
|---|---|---|---|---|
| SPY 25% | 1.00 | |||
| IWM 25% | 0.77 | 1.00 | ||
| VEA 25% | 0.76 | 0.72 | 1.00 | |
| SHY 25% | 0.03 | 0.15 | 0.19 | 1.00 |
Pearson correlation of weekly returns · 156-week common window ending 2026-08-28 · pairbook.io
The worst it would have been
Over the analysis window, this mix would have fallen at worst -11.4% (from the week of 2024-12-13 to 2025-04-11), shallower than the S&P 500's -16.9% over the same weeks, and it has since recovered that peak.
Worst weeks of the mix: -6.7% (week ending 2025-04-11), -3.3% (week ending 2026-03-13), -3.2% (week ending 2024-09-13).
FAQ
Three stock funds out of four: is that diversified?
By capital, yes; by risk, the table above shows the three equity quarters dominating. Bernstein knew this: the design accepts equity concentration in exchange for simplicity and the rebalancing bonus among imperfectly correlated equity sleeves.
What does the bond quarter do here?
SHY contributes almost nothing to risk, which is its function: it is the stable quarter that funds rebalancing into whichever equity sleeve has fallen.
Run this analysis on your own portfolio
The same X-ray, risk contributions, correlation blocks, ETF overlap, runs on any mix of 4,700+ US stocks and ETFs: paste your holdings into the free portfolio X-ray, or ask an AI assistant with the PairBook MCP server.
